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A model of endogenous targeting in duopoly

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  • Siemering, Christian

Abstract

The paper investigates welfare effects of targeted advertising in a duopoly. To this end, a game-theoretical model is proposed in which firms can make costly investments in their targeting technology. It can be shown that ex ante identical firms use different technologies in every pure-strategy equilibrium of the technology game. If firms target the same group of consumers, the low-technology firm could increase overall welfare by using a better technology. However, this leads to lower industry profits due to tougher competition among firms.

Suggested Citation

  • Siemering, Christian, 2023. "A model of endogenous targeting in duopoly," Information Economics and Policy, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:iepoli:v:64:y:2023:i:c:s016762452300032x
    DOI: 10.1016/j.infoecopol.2023.101047
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    References listed on IDEAS

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    More about this item

    Keywords

    Targeted advertising; Technology investments; Excessive targeting; Welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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